From April 2026, HMRC will hold recruitment agencies or end clients, not contractors, liable for unpaid PAYE tax if an umbrella company fails to comply with regulations. This should protect contractors from tax risk but may limit payroll options and cause some disruption.
At Riddingtons Payroll, we are committed to keeping contractors informed about vital changes that affect your pay and tax arrangements. From April 2026, new HMRC regulations regarding umbrella companies will introduce Joint & Several Liability (JSL) rules that could significantly alter how tax liabilities are managed in the contractor supply chain.
The new rules aim to shift responsibility for unpaid tax caused by disguised remuneration schemes away from contractors and onto recruitment agencies or, in some cases, end clients. This means if an umbrella company has been manipulating tax, the liability for any unpaid tax will, in most cases, fall on the agencies or clients rather than you.
Umbrella companies have provided a payroll solution for contractors but unfortunately, some have engaged in questionable practices to boost take-home pay or reduce costs through disguised remuneration. HMRC and the government want to address this widespread issue by reforming the marketplace to protect contractors from unexpected tax bills.
The biggest benefit for contractors is the reduced personal risk of being pursued for unpaid PAYE tax resulting from umbrella malpractice. However, there are some caveats. HMRC may still hold you liable if there has been collusion or if you have not exercised reasonable care with your tax affairs.
Additionally, expect some disruption as agencies review which umbrella companies they partner with. This could lead to changes in your payroll provider or employment arrangements.
At Riddingtons Payroll, we recommend contractors take the following steps to safeguard themselves:
While these changes aim to protect contractors and improve market integrity, they could also create some short-term challenges. We encourage all contractors to stay proactive and seek advice when needed.
Riddingtons Payroll remains dedicated to providing transparent, reliable payroll services you can trust through these evolving regulations.
For more information or support, please get in touch with our team.
Stay safe and stay informed with Riddingtons Payroll.
